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29-04-2023, 07:54 PM
Chris Price
Sat, 29 April 2023 at 2:41 am SGT
Jeremy Hunt has urged Andrew Bailey to "protect" taxpayers from unnecessary losses from the Bank of England's money printing programme after Threadneedle Street warned the bill was likely to top £200bn over the next decade.
The Chancellor echoed comments by the Bank's Governor that said central bankers will seek to "minimise [the] cost and risk" when unwinding its £800bn stockpile of government bonds.
......
Threadneedle Street said transfers between the Treasury and the Bank to cover losses realised on its stockpile of asset purchases will amount to around £30bn annually over the next three years alone.
The Bank warned that taxpayers faced an even higher bill of almost £300bn if interest rates suddenly spiked.
......
Under a historic deal struck during the financial crisis when quantitative easing (QE) was first launched, the Government agreed to cover any losses incurred by the Bank on the bonds it purchased to prop up the economy.
This is because QE created reserves held by commercial lenders in the form of deposits. The Bank pays interest on those reserves at the current base rate of 4.25%.
When interest rates were at record lows, the cost of paying interest on these reserves was more than covered by the money earned on government bonds.
The Bank sent a total of £123.8bn in QE profits to the Treasury between 2009 and 2022.
But tighter monetary policy means the Bank is now paying more interest on these reserves than it earns from the bonds it bought, with the Treasury covering the difference.
......
The Bank also started actively offloading around £80bn of its near-£900bn stockpile back to the private sector late last year, which will also likely lead to losses for the taxpayer. Mr Bailey said £60bn of this had already been achieved.
......
Taking into account previous profits, this will result in a cumulative net loss for the taxpayer of around £100bn, adding to Britain's already-large debt pile.
However, traders have ramped up their interest rate bets in recent weeks amid higher than expected inflation data which showed prices rose 10.1% in the year to March.
Markets are currently pricing in a peak of 5% this summer.
https://sg.finance.yahoo.com/news/regula...05143.html
Sat, 29 April 2023 at 2:41 am SGT
Jeremy Hunt has urged Andrew Bailey to "protect" taxpayers from unnecessary losses from the Bank of England's money printing programme after Threadneedle Street warned the bill was likely to top £200bn over the next decade.
The Chancellor echoed comments by the Bank's Governor that said central bankers will seek to "minimise [the] cost and risk" when unwinding its £800bn stockpile of government bonds.
......
Threadneedle Street said transfers between the Treasury and the Bank to cover losses realised on its stockpile of asset purchases will amount to around £30bn annually over the next three years alone.
The Bank warned that taxpayers faced an even higher bill of almost £300bn if interest rates suddenly spiked.
......
Under a historic deal struck during the financial crisis when quantitative easing (QE) was first launched, the Government agreed to cover any losses incurred by the Bank on the bonds it purchased to prop up the economy.
This is because QE created reserves held by commercial lenders in the form of deposits. The Bank pays interest on those reserves at the current base rate of 4.25%.
When interest rates were at record lows, the cost of paying interest on these reserves was more than covered by the money earned on government bonds.
The Bank sent a total of £123.8bn in QE profits to the Treasury between 2009 and 2022.
But tighter monetary policy means the Bank is now paying more interest on these reserves than it earns from the bonds it bought, with the Treasury covering the difference.
......
The Bank also started actively offloading around £80bn of its near-£900bn stockpile back to the private sector late last year, which will also likely lead to losses for the taxpayer. Mr Bailey said £60bn of this had already been achieved.
......
Taking into account previous profits, this will result in a cumulative net loss for the taxpayer of around £100bn, adding to Britain's already-large debt pile.
However, traders have ramped up their interest rate bets in recent weeks amid higher than expected inflation data which showed prices rose 10.1% in the year to March.
Markets are currently pricing in a peak of 5% this summer.
https://sg.finance.yahoo.com/news/regula...05143.html
